Foreign Investment in Indonesia

Expert legal guidance for establishing and expanding your business in Southeast Asia's largest economy

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Navigating Indonesia's Investment Landscape

Indonesia offers tremendous opportunities for foreign investors, with its growing middle class, abundant natural resources, and strategic location. However, the regulatory environment can be complex, with frequent changes to investment laws and sector-specific restrictions.

At Yolanda Law & Partners, we help international clients navigate the BKPM (Investment Coordinating Board) requirements, company establishment processes, and ongoing compliance obligations under Indonesian law.

100+ Foreign Clients Assisted

From startups to Fortune 500 companies

Key Foreign Investment Statistics

$47.3B

Foreign Direct Investment (2022)

6.1%

Average annual GDP growth

100%

Foreign ownership allowed in many sectors

3-6 Weeks

Typical PT PMA establishment time

Source: BKPM, World Bank 2023

Why Invest in Indonesia?

Economic Growth

Consistently strong GDP growth, projected to be the 4th largest economy by 2050 (PwC).

Demographic Dividend

270 million population with a growing middle class and young workforce (median age 29).

Strategic Location

Gateway to ASEAN with 40% of world trade passing through Indonesian waters.

Tax Incentives

Tax holidays, allowances, and VAT exemptions for priority sectors.

Negative List Reform

2021 Presidential Regulation opened 245 business lines to 100% foreign ownership.

Trade Agreements

Benefit from ASEAN FTAs and Indonesia's 20+ bilateral investment treaties.

Legal Framework for Foreign Investment

Primary Regulations
  • Law No. 25/2007 on Investment

    The foundational law governing foreign and domestic investment in Indonesia.

  • Presidential Regulation 10/2021

    Negative Investment List (DNI) specifying restricted/prohibited sectors.

  • BKPM Regulation 4/2021

    Procedures for licensing and investment facilities.

  • OJK Regulations

    For financial sector investments (banks, insurance, fintech).

Common Investment Structures
  • PT PMA (Penanaman Modal Asing)

    Foreign-owned limited liability company - minimum Rp10 billion capital.

  • Representative Office

    For market research without revenue generation.

  • Joint Venture

    With local partners for restricted sectors.

  • Regional Headquarters

    For multinational corporations managing ASEAN operations.

Priority Investment Sectors

The Indonesian government offers special incentives for these high-priority sectors

Renewable Energy Digital Economy Healthcare Infrastructure Manufacturing Tourism Agriculture Mining Processing Education Maritime

Available Incentives

  • Tax holidays (5-20 years for pioneer industries)
  • Import duty exemptions
  • Tax allowances (30% reduction for 6 years)
  • Simplified licensing through Online Single Submission (OSS)
  • Land rights concessions
  • Special economic zone benefits

Restricted Sectors

Certain sectors remain restricted or require local partnership:

  • Small-scale retail (max 33% foreign ownership)
  • Telecommunications (65-85% max)
  • Certain mining activities
  • Alcohol production/distribution
  • Certain agricultural sectors
  • Traditional herbal medicines

PT PMA Establishment Process

Our step-by-step guidance for setting up your foreign investment company

1

Pre-Licensing

  • Business activity verification against Negative List
  • Capital structure planning
  • Location analysis and permits
2

Company Establishment

  • Reserve company name at Ministry of Law
  • Prepare Articles of Association (AoA)
  • Notarize deed of establishment
  • Obtain taxpayer identification (NPWP)
3

Investment Licensing

  • Submit application through OSS system
  • Obtain Business Identification Number (NIB)
  • Sector-specific licenses (if required)
  • BKPM approval for investment plan
4

Post-Establishment

  • Company bank account opening
  • Visa processing for foreign staff
  • Monthly/quarterly reporting to BKPM
  • Tax compliance setup
Download Process Checklist Schedule Consultation

Frequently Asked Questions

The minimum paid-up capital requirement is Rp10 billion (~$700,000), except for certain sectors like trading companies which require Rp2.5 billion. However, the BKPM may approve lower amounts for specific industries or regions outside Java.

Foreigners cannot own freehold title (Hak Milik), but PT PMA companies can obtain:

  • Right to Build (HGB) for 30+20 years
  • Right to Use (HGU) for agricultural land
  • Right to Manage (HP) for large developments

Foreign individuals may purchase apartments under strata title with specific restrictions.

With proper preparation, the basic incorporation can be completed in 3-6 weeks. However, additional sector-specific licenses (e.g., for healthcare, education, or mining) may extend the timeline to 2-4 months. Our firm offers expedited services for time-sensitive projects.

PT PMA companies are subject to:

  • Corporate income tax: 22% (reducing to 20% by 2025)
  • VAT: 11% (increasing to 12% in 2025)
  • Withholding taxes on dividends, interest, royalties
  • Branch Profit Tax for permanent establishments
  • Transfer pricing documentation requirements

Tax treaties may reduce certain withholding rates.

Yes, foreign investors can acquire shares in an existing local PT company, converting it to a PT PMA when foreign ownership reaches or exceeds 1%. This requires:

  1. Due diligence on the target company
  2. Amendment of Articles of Association
  3. BKPM approval for the foreign investment
  4. Capital increase to meet minimum requirements
  5. Tax clearance and license updates

The process typically takes 4-8 weeks.

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Get detailed information on establishing and operating your business in Indonesia

PT PMA Guide
Tax Handbook
Employment Guide
Sector Analysis